Cramer: Why Manitowoc could have 30% upside

Looking at potential catalysts, Jim Cramer believes Manitowoc could print $42; that's a lot higher than where the stock is now.

For quite some time, the "Mad Money" host has been pounding the table about Manitowoc, saying the company could unlock significant value by separating its construction crane business from its food services unit.

"Sure enough, in late June, activist hedge fund Relational Investors established a stake in the company and urged management to do just that, Cramer said, spin-off its food service business."

Because Relational Investors is the same firm that convinced Timken to spinoff TimkenSteel, Cramer believes the likelihood of a Manitowoc spinoff is that much greater.

However, he also says there's more to the story.

CJ Schmit

A Manitowoc crane on a tug and barge near Milwaukee, WI.

"Manitowoc's crane division is the definition of a cyclical business," Cramer explained. "That means when the economy heats up business increases substantially. And I think there's every reason to believe the economy is heating up."

Therefore, Cramer sees the crane business commanding an even higher premium, than already factored into share price. In fact, he's crunched some numbers and he thinks upside is significant.

"If you value Manitowoc's crane business at nine times next year's core earnings before interest, taxes, depreciation and amortization, a slight discount to other construction companies like Caterpillar, Oshkosh and Terex, then it would be worth $3.5 billion.

"Now let's say you value the foodservice business at 12 times earnings, which is a slight discount to rival Middleby, then the foodservice spin-off would be worth $4.25 billion."

"Put it together, and a broken up Manitowoc would be worth $42 per share, or a 30 percent premium to where the stock is currently trading."

"All told, as the economy improves, a breakup makes even more sense," Cramer added. And he believes that Relational is well aware of that fact, too.

Of course, as with any aggressive play, there is a caveat. Cramer said Manitowoc's management has historically been very reluctant to spinout their foodservice business arguing it gives them diversification away from the cyclical crane portfolio, which is valuable in a down economy.

Nonetheless, given the value a breakup could be generate for shareholders in an improving economy, Cramer thinks management will feel obligated to take another look. "And, with the newfound pressure from the activists at Relational Investors, who can be very persuasive as we've seen with Timken, I think the chance of a breakup is currently greater, now, that it's ever been."